INSURANCE LAW Definition A contract between an insurer

INSURANCE LAW

Definition �A contract between an insurer and the insured in terms of which the insurer undertakes, in exchange for the payment of a sum of money (the premium), to give to the insured a sum of money (or its equivalent) on the occurrence of a specified but uncertain future event in which the insured has some interest

Insurance legislation �Long Term Insurance Act �Short Term Insurance Act

Duties Good faith Disclosure Brokers duty to advise disclosure Notify of loss Co-operation Mitigation of damages Not to impair subrogation rights To pay the premium

The 4 essential elements �The insurers obligation to pay a sum of money or its equivalent �The insured's obligation to pay the premium �The occurrence of an uncertain future event �An insurable interest

Insurable Interest � The insured must have some kind of interest in the thing being insured ◦ Eg: economic interest � This is what distinguishes the insurance contract from a wager or gambling

Types of insurance �Indemnity insurance �Non-indemnity insurance

Indemnity insurance �There is uncertainty as to whether the insured event will ever occur ◦ Eg: a hijacking, a car accident, a fire �The amount of the loss (if any) is unknown at the time of taking out the policy �The insured must have an insurable interest in what is being insured

Non-indemnity insurance �It is certain that the event will occur – the only uncertainty is when ◦ Eg: a persons death �The amount the insurer must pay is decided at the time the insurance is taken out & is not related to the loss �The insured must have an insurable interest in the life of the person being insured

Good faith � The concept of ubermae fides

Warranties �Affirmative warranties �Promissory warranties

Affirmative warranties �A declaration ◦ Eg: Age last birthday �Materiality

Promissory warranties �A promise or undertaking ◦ Eg: The insured must arm the alarm system whenever leaving the property unattended �Does not have to be material

Under & over insurance � Over insured – no benefit to insured � Under insured – insurer will apply average

Subrogation � Places insurer in shoes of insured � Allows insurer to sue in insured’s name � Cannot benefit twice from your mishap